TSLA Crosses $1k/Share (again)

but is a new high

Stock prices are unbound from intrinsic value. Contrary to what many hope, it is simply a pyramid scheme on top of a long-completed round of fundraising.

Well, let's start by saying that we should be comparing Enterprise value not market cap because other than Tesla, car companies tend to have a huge amount of debt on board (which artificially decreases their market cap). Plenty of the big car companies have multi-hundred billion dollar values. Ford at $200Bn, Toyota at $380Bn, VAG at $270Bn. So it's not unreasonable for a good car company to be worth in the hundreds of billions. Tesla also owns some valuable verticle integration with their battery IP and probably has first mover advantage in procuring the requisite metals.

Add to that unwarranted hype around self-driving cars, valuation metrics that are more suited to a tech start up than a car company, and the first mover advantage in the electric car space combined with competitors whose shareholders won't tolerate the investment required to catch up.

Most likely something like the Apple Car will be the first point at which the valuation gets properly tested.

Investors for growth companies are betting on the company's future performance. The more confident they are, and the size the investors predict they will eventually achieve, determine how much investors are willing to pay.

There are enough investors who believe with confidence that Tesla will become big enough to justify the current price, that they buy now.

For example, if Tesla ultimately generates $50 Billion in earnings per year, (current annualized earnings around $5 Billion), and are at $1,000/share, they have a P/E of 20 (which is lower than the S&P 500 overall P/E).

Current annualized unit sales are about 900,000 cars. They'd need to grow that by 10x to get the earnings that would result in a P/E of 20. GM + Ford combined sold > 10,000,000 cars last year, so Tesla would need to get as big as those two combined to justify a $1 Trillion market cap, gross margins notwithstanding...

A combination of short seller punishment and an epic reality distortion field.

TSLA is a meme stock. People buy it because they are convinced there is a greater fool who they can sell to in the future for profit.

There is no rational way to value TSLA at 1 trillion today